New Option on the Advance Child Tax Credit Portal

Families can now easily update their mailing address in the IRS Child Tax Credit portal. This is very important for families who choose to receive their payments in the mail, rather than by direct deposit.

To use the portal, go to the IRS Child Tax Credit page and select “Manage Payments.” The portal now allows users to:

  • Change their mailing address;
  • Switch from receiving a paper check to direct deposit;
  • Change the account where their payment is direct deposited; or
  • Stop monthly payments for the rest of 2021.

If you run into challenges using the portal, our July 12 post offers a few tips. An earlier post explains what is different about the Child Tax Credit in 2021, including who is eligible for the expanded credit. If you previously were eligible, based on your income in prior years, but are no longer eligible now, you might consider opting out of the advance payments, which are being sent monthly on the 15th of each month through the end of 2021.

Log into the portal by midnight (Eastern Time) on August 30 if you want the changes to kick in for the September 15 payment. The IRS expects to add a few more functions to the Child Tax Credit portal in coming months, including the ability to:

  • Add or remove children in most situations;
  • Report a change in marital status; or
  • Report a significant change in income.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

College Students and Money: A few more things

This is the fifth and final in a series this week about financial issues faced by students in college and trade school.

The list of financial topics that are important to students and other young adults is potentially endless, so please don’t assume that I’ve covered everything this week. Whether we are age 20 or age 60, we always need to keep learning about finances, because the financial world keeps changing – and our needs keep changing too. I’m wrapping up this series with brief notes about three more issues I see as critical for students.

Organizing Important Documents. Keeping important documents in a safe place where you can find them easily if needed is a critical skill to learn. And it is important for all key documents, whether they are paper documents, or electronic documents. Examples of important documents include:

  • Financial records of all types – financial aid papers, loan papers, receipts for major payments (tuition, rent),
  • Documentation of required educational costs, because you may be eligible for tax benefits,
  • Legal contracts (e.g. lease, cell phone plan contract) and documentation of pre-existing damage in a rental unit or dorm room,
  • Tax documents, including prior-year tax returns and documents, along with current-year W-2 forms and any other income records, as well as other year-end tax forms received.

I will not pretend this is a comprehensive list. General rule: if you think it might be important, keep it, at least until you can ask someone trustworthy about it. And I don’t mean just keeping it all laying around your room. We want these documents in a safe place where you can find them. That means they should be enclosed (in a box, or an envelope, or a designated drawer), and ideally they would be sorted into groups or sections or folders so you don’t need to look through all 500 documents to find the one you need. On your computer, you need a folder for important documents, probably with several sub-folders.

Protecting Personal Information. This means never giving out key personal information (social security number, birthdate, financial account numbers, and more) without making sure the person who is asking has a good legal reason to need the information. You will generally need to give your social security number for financial accounts, formal academic records, and medical records.

Additionally, only give that information to people when you know for sure they are who they say they are. That means if you receive a phone call and the caller says they are from your bank, don’t assume it is safe. When people call you, there is no way for you to know who they really are. Instead, use the number you already have on file for your bank and call them. Make caution your middle name when it comes to key personal information.

More: What to Consider When Sharing Your Data (Consumer Financial Protection Bureau)

Using Credit Cards Wisely. We could write a whole series on credit cards – and you can search the MoneyTip$ blog for other articles – but I want to focus on three main points:

  • College is an opportunity to build credit. You can do that by getting credit card and using it. College is a time when credit cards want you as a customer – later in your life, it may be more difficult to obtain credit. So go ahead and open one or two credit card accounts, avoiding cards with annual fees. Then use them. It is only by using your credit cards and paying the bills promptly that you create something extremely valuable: a solid credit history.
  • Surprise credit card bills can kick off a downward financial spiral. Therefore, keep tabs on how much you have charged to your card since the last bill. Keep a record on your phone, or on your whiteboard, or in a notebook or your checkbook – it doesn’t matter where you keep the record. Just make sure you’re prepared for the bill when it comes.
  • Credit is generally free if you pay the bill in full each month. Assuming your card has a grace period and no annual fee, you will pay no interest at all on your purchases if you pay the entire balance before the due date each month. Sure, the bill says you only need to pay $25, but as soon as you carry a balance forward to next month, you start accruing interest on every purchase you make.

An ounce of prevention is worth a pound of cure, right? These three habits – organizing documents, protecting personal information, and using credit wisely – will dramatically reduce the number of financial “bumps in the road” you’ll experience during college and throughout the rest of your life. You’ll never regret building these helpful financial habits.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Child Tax Credit Update: Non-Filers Tool

Over the next few weeks we expect to see several updates about how to access the special 2021 Child Tax Credit described in last week’s post. Reminder of what makes the 2021 credit “special:” 1) it is bigger; 2) part of it is payable in monthly advance payments beginning in mid-July; and 3) it’s available even to people who don’t file taxes and/or who don’t have income!

Today the IRS announced a new “Non-Filer Sign-Up Tool” for those who did not and will not file in 2019 or 2020.

For most households, the IRS will base the monthly advance payments on information from 2019 or 2020 tax returns. But what about people who did not file and do not NEED to file for either 2019 or 2020? Today the IRS announced a new “Non-Filer Sign-Up Tool” to help make sure those folks receive their payments. This allows parents/guardians to enter information about the people in their household, AND to enter direct deposit information so they receive their tax credit payments speedily.

Please share this information with those who need it!!

A couple of notes:

  • If you filed a 2019 or 2020 tax return, you don’t need to take any action.
  • If you used the “non-filers tool” LAST year (2020) to receive your Economic Stimulus Payment, you don’t need to take any action.
  • In the coming weeks the IRS will be adding two more tools: 1) an interactive tool to help you find out if you are eligible for the expanded Child Tax Credit; and 2) a Child Tax Credit Update Portal, where you can add children born in 2021 or make updates that matter, including changes to your address or bank information.
  • A non-profit organization has launched a consumer-friendly informational website that may be useful at https://www.getctc.org/en. I recommend sharing it widely!

Source: https://www.irs.gov/newsroom/irs-unveils-online-tool-to-help-low-income-families-register-for-monthly-child-tax-credit-payments
For more information: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Attention Parents! New Child Tax Credit Features

The American Rescue Plan Act, a huge federal COVID recovery bill passed in March, did more than provide for $1400 stimulus payments. One of its provisions will soon begin impacting millions of American families with children: advance payment of the expanded child tax credit. Those affected should:

  • Plan now for best use of extra funds.
  • Make a point to pay attention to IRS updates on this topic over the next several weeks.
  • Watch their mail – the IRS has begun this week to mail a general information letter to all families it believes to be eligible. In July, they will mail individualized letters specific to each household, telling what to expect.

Expanded Credit. The Child Tax Credit was formerly $2,000 per child; it was unavailable to families with no income, and the amount was limited for families with very low income. For 2021 only:

  • Families with children who will still be under age 18 at the end of the year (born after December 31 2003) are eligible for the full amount of the credit, even if they had no or low income.
  • The amount of the annual credit is increased to $3,000 for most children, and to $3,600 for children under 6 (born after Dec 31 2015).

NOTE: the expanded credit is available to families with incomes below $75,000 (single); $112,500 (head of household); or $150,000 (married-joint). Families with higher incomes will still receive the $2,000 child tax credit under the previously-existing rules.

Advance Payment. Instead of waiting until tax time next February, eligible families will begin receiving monthly advance payments for part of the Child Tax Credit. This means that beginning about July 15 through December, families will receive monthly payments from the IRS equal to $250 per child. The amount will be $300 for younger children eligible for the $3,600 credit. These advance payments will equate to half of the total tax credit; the remainder will be paid as part of the household’s tax refund next spring.

Consider focusing on family stability. Before making special purchases, families may wish to use the funds to get current and/or stay current on all household expenses (rent, utilities, child care, etc). Building a savings cushion also promotes stability: 1) providing funds in case of unexpected expenses such as car repair or appliance replacement; AND/OR 2) covering upcoming expected costs such as back-to-school, holidays, or property taxes. A savings cushion to cover extra expenses can prevent financial setbacks, promote family stability, and reduce financial stress.

Paying off debt is also a good use of extra funds, especially debts with high interest rates. HOWEVER, it is often wise to build a savings cushion even before all debt is paid off. Without that savings, every unexpected expense simply creates more debt and more stress.

Watch for Updates! The IRS will base payments on information from 2020 tax returns. If your situation changes, you will be able to let them know of changes through one or more on-line portals they will create in the near future (similar to the “Check Your Refund” portal, or the “Get My Payment” portal used for stimulus payments). The portal(s) will allow families to enter information such as: bank information for direct deposit; a new child in your household; updated mailing address. The portal will also allow you to decline the advance payments and choose to receive the entire amount with your tax refund after the year is over.

The IRS reference page for the advance child tax credit is here.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Where’s My Refund? Where’s my EIP?

I am one of several Iowa State University Extension and Outreach Field Specialists that assist families with tax preparation and e-filing. This past week, I have been receiving at least one phone call a day from individuals wanting to know where their refund is. Many tell me they have already been to the website to check their status. The only place individuals should be checking their refund status is at the IRS.gov web site. Likewise, if you are wondering about the status of your Third Economic Impact Payment (generally $1400/person), the IRS web site is your source.

IRS.gov is the only safe place to check your refund or your stimulus payment

Refund Status. There are ONLY THREE QUESTIONS that need to be answered when using the Get Your Refund Status link on the IRS.gov website: 1) The Social Security number of the person listed on the return as the FIRST NAME on the return (not the spouse); 2) Your FILING STATUS (single, married filing jointly, head of household, married filing separately, or qualifying widow(er)); and 3) the amount of your refund, which is found on line 35A of page 2 of your federal tax return.

Stimulus Payment Status. Here again, the IRS has THREE QUESTIONS, although they are different. The needed information is: 1) Your Social Security number; 2) Your date of birth; and 3) Your mailing address. The mailing address can be tricky if you have moved recently. Generally, you should enter the mailing address on the most recent tax return the IRS has processed from you. However, if you have not filed a tax return in recent years, use the mailing address on file at Social Security or the Veterans Administration. Note: The tool to check your stimulus payment only relates to the third economic impact payment, authorized in the American Rescue Plan signed in mid-March. If you have not received either of the first two payments, your only option is to file a 2020 tax return, even if you have no income to report. The tax return allows you to claim the first two stimulus payments, and also sets the wheels in motion to process your third payment.

If you “google” where’s my refund and are taken to a website that asks for additional information, such as your salary, mother’s maiden name, or any other personal information, you are in the wrong place; you may be giving your personal information to someone who is stealing your identity.

~ Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

More Posts

$1400 Stimulus: The Same, Yet Different

People are excited about the extra $1400 stimulus payments that are coming. Last Saturday, just ONE day after the bill was signed, I heard by the grapevine that some folks already received their payment! More received it this past week, and more will be receiving it in the next several weeks. Even though Americans knew this was coming, and even though it is the third in a series of payments promoting economic recovery from the impact of the pandemic, it does involve some differences worth noting.

  • All dependents qualify. Under the earlier stimulus payments, households received extra payment only for dependents who were eligible for the Child Tax Credit (i.e. under age 17). However, the new round of payments will include dependents who are older children, parents or others. Caveat: it may not be safe to assume that this includes dependents who are not relatives or other atypical dependents – we will need to watch how the law is applied.
    This is the BIGGEST change, and will affect MANY families!
  • The payments are protected from being held back to pay federal debts, such as back student loans, back taxes or back child support. However, as of now, these funds are not protected against private debt collectors after they arrive in your bank account; they could be seized (garnished) for repayment of credit card debt or other private debt.
  • The payments are available to people below certain income limits, just as before, but this time the phaseout is steeper. The phaseouts are as follows: Single Filers and Married Filing Separate phase out from $75,000 – $80,000; Head of Household phases out from $112,500 – $120,000; Married Filing Joint, from $150,000 – $160,000.
  • The steep phaseout means that for some households, the difference in income from one year to the next may be important. The income guidelines may be applied to your income for either of two or three tax years, and if you meet the rule for any of the years, then you will be eligible. For starters, they will check your most recently-filed return, which may be either 2019 or 2020. If you were below the threshold for 2019 but above it for 2020, it may be worthwhile to delay filing your 2020 return until you receive your payment. If your 2020 income is within the limits, then your 2020 return will be used, as long as it is filled within 90 days of the tax-filing deadline of May 17, 2020. And if you didn’t qualify based on 2020, you can still receive the payment as part of your 2021 tax return.
    One key implication: if your income in a normal year would put you above the limits, but you had lower income in 2020, then get your 2020 tax return filed before that deadline of 90 days after May 17!
  • If the payment is made based on your 2019 or 2020 income, and then your 2021 income proves to be above the limit, you will not need to pay anything back.

Source: Kitces.com

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Unemployment Compensation Exclusion – Stay tuned!

When the American Rescue Plan was passed recently, consumers paid most attention to the $1400 stimulus checks (which we’ll discuss in an upcoming post), but there’s another feature that has gotten less attention. If you received unemployment compensation in 2020, it’s good news for you!

The first $10,200 of unemployment income you received in 2020 will now be excluded from your taxable income. This exclusion applies in 2020 only. Exception: you are not eligible for the exclusion if you are a high-income household (over $150,000). In states that follow most provisions of federal tax law, including Iowa, the exclusion also applies to state income tax.

This Unemployment Compensation Exclusion will make a big difference on tax returns for people who qualify, reducing tax bills (and/or increasing refunds) by $1,000 or more for some households. Note: the amount depends on how much unemployment compensation you received and on your total taxable income.

The software we use at Volunteer Income Tax Assistance (VITA) sites was updated very quickly; the update was in place by Friday March 19, only a week after the law was signed. I’m sure the same is true for most other tax software packages.

Some of you may be wondering: what if I filed my tax return earlier in the season??

Do not fear – you are also eligible for the exclusion. However, we do not yet know how that is going to be handled; we need to wait for word from the IRS. For now, the IRS says: “WAIT – don’t take any action until we’ve announced how you should handle it.” The worst-case scenario is simply that you would need to file an amended tax return.  However, some of us are hoping that the IRS and their computers will be able to simply pull out those tax returns, recalculate them, and issue the additional refunds. If that would happen, taxpayers would see two results: 1) an additional refund (check or direct deposit); and 2) a letter explaining the adjustment. Don’t be surprised if the refund arrives before the letter. The same issue arises for state tax returns, and the possibilities are basically the same as well: they may be able to recalculate and issue additional refunds with no action from you, OR you may have to file an amended return. Reminder: for now, the IRS does NOT want anyone to file amended returns for this purpose.

If you are eligible for the Unemployment Compensation Exclusion but filed your taxes before it was enacted, you will need to stay tuned for more information and you may need patience. As always, never ignore a letter from the IRS, and pay attention to your bank statements.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Every Little Bit Counts

I raise bees, then extract and sell their honey. I set my finances up so I can keep that money separate and use it to buy or replace equipment, hoping my hobby would support itself. If I run my apiary as a business, I would need an EIN (Employer Identification Number), and would need to keep good records of all my Income and Expenses. If I run my apiary as a hobby, I will still need to keep good records because I will need to report my income. Personally, I would keep track of my expenses even though they will not help me when filing my tax return. As much as I love bees and their honey, I want to track my expenses to make sure I am not losing too much money with this hobby.

An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. As a business, you will use a Schedule C to report your business activities (income and expenses) and determine what tax should be paid.  You will also be expected to pay self-employment tax quarterly.

As for me and my hobby, I will report my honey sales on a Schedule 1, line 8 of the Form 1040. The income won’t be subject to self-employment tax. On the downside, I may not be able to deduct expenses associated with my apiary.

So, you might be wondering now, “why report the income if I will have to pay taxes on it?” The first reason is that the law requires it. But in addition, there are at least two ways you can benefit from reporting the income.

  • If you have a lower income and are trying to make ends meet by working on the side, any earned income will be used to calculate the Earned Income Credit. Hobby income is not considered “earned income,” but if you report it on Schedule C as business income, then it is considered “earned income.” The earned income credit (EIC) is a tax credit that helps certain U.S. taxpayers with low earned incomes reduce the amount of tax owed on a dollar-for-dollar basis and may result in a refund to the taxpayer if the amount of the credit is greater than the amount of tax owed.  
  • Another benefit of reporting that income as earned income relates to Social Security. Remember that the monthly social security check you will receive in the future is based on current and past work and earnings history. Social Security retirement benefits are based on your average indexed monthly earnings (AIME) over your 35 highest-earning years.  You must have 40 quarters of at least $1410 (2020 rule) of earned income to qualify for Social Security.  Though the income from any job-on-the side is not enough to live on, it may be worth counting toward your 40 quarters and the calculations used to determine your future social security check.

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

More Posts

Reduced Income in 2020? Check on the EITC

Today is EITC Awareness Day — a great day to remind people about the benefits of the Earned Income Tax Credit. This credit is an “add-on” to your tax refund if you qualify — it is designed to provide a financial boost to working people with low and moderate incomes. This one-minute video gives a great overview!

Even if you’ve never been eligible for the EITC in the past, there’s a chance you might be eligible for it in 2020 if your income was lower, and within the income guidelines. Two figures affect the amount you receive: your total income (Adjusted Gross Income) AND your earned income — income that was payment for work. The maximum income guidelines depend on family size; the highest limit ($56,844) applies to married-filing-jointly households with three or more children. Other eligibility rules apply as well; check out the details and/or use the IRS screening tool.

P.S. Maybe you never guessed the IRS had a YouTube channel! Their videos do a great job explaining lots of tax topics!

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

    

Subscribe to “MoneyTip$”

Enter your email address:

Delivered by FeedBurner

Archives

Categories